Strategic Management

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Strategic Management

• The Context of Managing Strategically

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Learning Outline

• What goes into determining the organizational
  context?
• Stakeholders
• Ethics
• Factors of the new business environment
• Competitive advantage

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Organizational Stakeholders
Shareholders
Political Action Groups
Governments
Organization
Trade Associations
Customers
Social Action Groups
Suppliers
Employees
Communities
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Why do strategy?

• Gain competitive advantage
• Sets an organization apart
• Having something other competitors don't
• Doing something better than other organizations
• Doing something that others can't
• Necessary for long-term success and survival

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Things to consider
Drivers of the New Business Environment
Information revolution Technological
advances and breakthroughs Globalization
Implications Continual turbulence and
change Reduced need for physical
assets Vanishing distance Compressed time
Critical Success Factors Ability to embrace
change Creativity and innovation capabilities
Being a world-class organization
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Drivers of change

• Information Revolution
• Information readily available
• Information as the essential resource of
  production
• Technology
• Perform tasks with equipment, materials,
  knowledge, and experience
• Increasing rate of change and diffusion
• Increasing commercialization of innovation
• Globalization
• Marketplace
• Competitors

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Drivers of the New Business Environment
Information revolution Technological
advances and breakthroughs Globalization
Implications Continual turbulence and
change Reduced need for physical
assets Vanishing distance Compressed time
Critical Success Factors Ability to embrace
change Creativity and innovation capabilities
Being a world-class organization
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Implications of These Driving Forces

• Continual Turbulence and Change
• Change
• Any alteration in external environmental factors
• or
• internal organizational arrangements
• Organizational change
• Any alteration in what an organization does
• and
• how it does it

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Implications of These Driving Forces
Reduced Need for Physical Assets
Traditionally, massing physical assets led to
power Today, physical impedes flexibility,
value in intangible
Yesterday Today Physical Nonphysical
Manufacturing facilities
Customer databases
Office buildings Equipment Inventory
Online ordering systems Process
innovation Employee knowledge sharing
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Implications of These Driving Forces

• Vanishing Distance and Compressed Time
• Boundaries dont determine customers and
  competitors
• Instant info delivery (Southwest, Amazon, etc.)
• Instant interactivity creates dynamic environment
• Vulnerability
• Increased vulnerability organizations face from
  interconnectedness and openness

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Drivers of the New Business Environment
Information revolution Technological
advances and breakthroughs Globalization
Implications Continual turbulence and
change Reduced need for physical
assets Vanishing distance Compressed time
Critical Success Factors Ability to embrace
change Creativity and innovation capabilities
Being a world-class organization
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Critical Success Factors
Ability to Embrace Change
Change agents Creativity and Innovation
Capabilities Create and innovate or
lose! Creativitya unique ability Innovative
organization channels creativity
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Major Characteristics of World-Class Organizations
Strong Customer Focus
Continual Learning and Improvement
Significant Technological Support
World-Class Organization
Egalitarian Climate
Flexible Organization Structure
Creative Human Resource Management
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Ethics

• Corporate Social Responsibility
• Decision makers have an obligation to recognize
  the interrelatedness of business and society

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Hewlett-PackardsBasic Values The HP Way

• Sharing firms success with employees
• Showing trust and respect for employees
• Being genuinely interested in providing customers
  with effective solutions to their problems
• Individual initiative, creativity, teamwork
• Being a good corporate citizen

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Think about it..(from C.S. Lewis)

• And the prophecy I make is this. To nine out of
  ten of you the choice which could lead to
  scoundrelism will come, when it does come, in no
  very dramatic colours. Obviously bad men,
  obviously threatening or bribing, will almost
  certainly not appear. Over a drink, or a cup of
  coffee, disguised as triviality and sandwiched
  between two jokes, from the lips of a man, or
  woman, whom you have recently been getting to
  know rather better and whom you hope to know
  better still- just at the moment when you are
  most anxious not to appear crude, or naïf or a
  prig- the hint will come. It will be the hint of
  something which the public, the ignorant,
  romantic public, would never understand
  something which even the outsiders in your own
  profession are apt to make a fuss about but
  something, says your new friend, which "we"- and
  at the word "we" you try not to blush for mere
  pleasure- something "we always do."
• And you will be drawn in, if you are drawn in,
  not by desire for gain or ease, but simply
  because at that moment, when the cup was so near
  your lips, you cannot bear to be thrust back
  again into the cold outer world. It would be so
  terrible to see the other man's face- that
  genial, confidential, delightfully sophisticated
  face- turn suddenly cold and contemptuous, to
  know that you had been tried for the Inner Ring
  and rejected. And then, if you are drawn in, next
  week it will be something a little further from
  the rules, and next year something further still,
  but all in the jolliest, friendliest spirit. It
  may end in a crash, a scandal, and penal
  servitude it may end in millions, a peerage and
  giving the prizes at your old school. But you
  will be a scoundrel.

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Managing Strategically and Competitive Advantage
Managing strategically means formulating and
implementing strategies that allow an
organization to develop and maintain competitive
advantage
Competitive advantage is what sets an
organization apart its competitive edge
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Managing Strategically and Competitive Advantage
Table 2.1 Comparison of I/O, Resource-Based,
Guerilla Views of Competitive Advantage
I/O View Resource-Based View Guerilla View
Competitive Positioning Possessing
unique Temporary Advantage in industry organizatio
nal assets Determinants Characteristics Type,
amount, Ability to change and of of
industry and nature of radically
surprise Profitability firms position firms
resources competitors with within
industry strategic actions Focus of
Analysis External Internal External and
internal Major Competition Resources Continual,
radical, and Concern competencies chaotic
conditions Strategic Choosing Developing Rapidly
and repeatedly Choices attractive unique
resources disrupting current situation industry
and capabilities and surprising competitors
Positioning in industry Characteristics of
industry firms position within
industry External Competition Choosing attractive
industry
Possessing unique organizational assets Type,
amount, and nature of firms resources Internal Re
sources capabilities Developing unique
resources/ dist. capabilities
Temporary Ability to change and radically
surprise competitors with strategic
actions External and internal Continual, radical,
and chaotic conditions Rapidly and
repeatedly disrupting current situation and
surprising competitors
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Managing Strategically and Competitive Advantage

• Industrial Organization (I/O) view
• Focus of the strategic analysis is external
• Structural forces within an industry
• The competitive environment of firms
• Michael Porters 5-forces

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Managing Strategically and Competitive Advantage

• Resource-Based View (RBV)
• Exploiting resources
• develops and maintains advantage
• Difference in culture, experience, assets, and
  capabilities
• Link internal assets and capabilities with
  environment
• Key assets (resources) give a firm sustainable
  advantage
• Financial Physical Human Intangible
  Structural-cultural
• Resources must be unique

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What Makes Organizational Resources Unique?
Is it rare?
Does it add value?
Organizational Resources as Competitive Advantage
Can firm exploit it?
Is it hard to imitate?
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Managing Strategically and Competitive Advantage

• Guerilla View
• Competitive advantage is only temporary
• Changes that characterize environment
• Continual
• Radical
• Revolutionary
• Successful organizations must be adept at
• Rapid and repeated disruptions of current
  situation
• Radical surprises keep competitors off balance

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Takeaways

• The New Business Environment
• Drivers
• Implications
• CSFs
• Perspectives on competitive advantage
• What determines the perspective